
Historical Outlook Reprints, No. 8 



Economic Aspects of the War 



Selected Source Material Dealing with the 
Economic Aspects of the War 

ARRANGED BY PROFESSOR WILLIAM E. LINGELBACH 



Effect of the War on the Supply of 
Labor and Capital 

BY PROFESSOR ERNEST L. BOGART 



PHILADELPHIA 

McKINL.EY PUBLISHING COMPANY 
1919 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



Historical Outlook Reprints 

These pamphlets are of great value to teachers, students and general readers 
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No. 3. A Bibliography of the Great War. By Prof. George M. Dutchee. 
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SOl'RCE >rATF,RIAT,.S ON F.CONO!VriC ASPECTS OF THE WAR. 






Selected Source Material Dealingwith the Economic 

Aspects of the War 

ARRANGED BY PKOFESSOR WILLIAM E. LINGELBACH. 



German Industry and Commerce in the Imperial 
Plan of Conquest. 
In a remarkable book on Economic Germany, Pro- 
fessor Henri Hauser, of the University of Dijon, 
discusses German industry as a factor making for 
war. He points out how, in the opinion of the lead- 
ers of German thouglit, Germany had definitively 
passed from the type of the agricultural state to that 
of the industrial state — a " tentacular " state. The 
needs and problems of this new German state are 
then set forth, among them the fact that twenty mil- 
lions of the sixty-seven million inhabitants of the 
Empire depend for their maintenance on foreign 
harvests and foreign cattle, that raw materials, espe- 
cially cotton from abroad, are essential, and that 
both capital and markets are a necessity. It is plain 
that the interests of the proletariat are in this mat- 
ter identical with those of capital and its interests, 
and Germany's aggressive war policy is therefore 
much more deeply rooted in the minds of the German 
jicople than those who are inclined to put all blame 
on the Junkers and military leaders have been will- 
ing to admit. The insidious trade nuthods and world 
policy of the tentacular German state is grapiiically 
described in the following extract from Mr. Hauser's 
book: 



Its first business is to find means to develop its policy of 
export. The first means adopted is the system of bounties. 
As German industry is working less for the home market 
than for foreign markets it is logical to sell cheap, some- 
times even to sell at a loss beyond the frontier in order to 
win new markets and to discourage all competition. 
Thanks to the system by which the chief economic forces aie 
grouped in cartels, the process is easy enough. In 1!>02 
the cdke-syndicate compelled the German consumer to pay 
los. a ton while at the same time it agreed to sell large 
quantities abroad at lis. In the second half of 1000 the 
iron-wire syndicate had sold abroad at 14s. per 100 kg., 
while the home price was 2.')s. It thus made a minus profit 
on the foreign market, that is, a loss of £42.050, and on 
the home market a profit of .€.')S,8.i0. Tliis gave a balance 
on the right side. But tliis time the trick was overdone, 
for the result was that (Jernian iron was bought up abroad 
to lie re-exijorted to Germany at a profit. Next to the sys- 
tem of bounties comes that of treaties of commerce, which 
favor the importation of provisions and of laborers (Slavs, 
for example ) , and which secure a moderate tariff for Ger- 
man goods abroad. .Such is the basis of the Russo-German 
Treaty of 1004, the tendency of which was to make Russia 
an economic colony of Germany. 

In order to meet the want of iron, Germany had to con- 
quer new supplies of iron ore. Peaceful conquest to begin 
«i(li. nie expert adviser atfciched to the commissioncra 
of delimitation in 1871 allowed the iron-ore strata of the 
Woi-vre to escape, from ignorance of their real importance 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



and also because he thought them inaccessible by reason of 
their depth, unworkable because of their high percentage of 
phosphorus. But the application of the Tliomas process in 
1878 converted the Briey basin into the most important 
iron-field at present being worked in the world. 'ITiat is 
why Tliyssen made his waj' into this region at Batilly, 
Jouaville and Bouligny, under fictitious names. At the 
same time he sent his divers to Dielette to search for ore 
under the sea; he planted his agents in the mining and 
metallurgical company at Calvados, started under some- 
one else's name the company of mines and quarries at Fla- 
manville, and then the powerful company of smelting and 
steel-works at Caen. By these operations he gained the 
double advantage of buying ore from us and selling coke 
to us. With the iron of Lorraine and Normandy and the 
coal of Westphalia, Germany would he the mistress of the 
world. 

To make sure of this supremacy it was of importance to 
remove all competition and establish German industry in 
the very heart of the country of her rivals. A description 
was given before the war of the extraordinary control ac- 
quired by German manufacturers over French works pro- 
ducing chemical materials, electricity, etc. At Neuville- 
8ur-Saone it was the Badische Sodafabrik which, under a 
French name, provided the madder-dye for tlie red trousers 
of the French army, and possibly it even inspired the Press 
campaign, conducted with the support of sentimental argu- 
ments, in favor of a color which was dangerous from a mili- 
tary point of view. The Parisian Aniline Dye Company 
{Compagnie parisienne des eouleurs d'aniline) was nothing 
but a branch of Meister, Lucius and Bruning, of Hoeehst. 
We have been told how a Darmstadt company for produc- 
ing pharmaceutical goods came and established a branch 
at Montereau in order to destroy a French factory which 
was there before, and how the AUgemeine Elektri- 
zitdtsgesellschaft got hold of Rouen, Nantes, Algiers, Oran 
and Chateauroux. 

The same conquests were won at Seville, Granada, Buenos 
Aires, Montevideo, Mendoza, Santiago and Valparaiso, 
while the other great electric company of Germany, the 
Siemens-Schuckert, established itself at Creil. Turkey, 
Russia, Italy and Switzerland shared the fate of France. 
Some weeks ago a Swiss journal gave tlie following figures: 
SocU'ti anonyme pour I'industrie de I'aluminium (Neu- 
chatel) : staff, 8 Germans, 1 Austrian, 6 Swiss; Banque des 
chemins de fer orientaux (Zurich) : 8 Germans, 1 French- 
man, 1 Belgian, 1 Austrian, 5 Swiss; Banque pour entre- 
prises ilectrv{ues (Zurich): 15 Germans, 9 Swiss; BociM 
des valeurs de mftaux (Bale), 10 Germans, 5 Swiss. It is 
to iie noticed that the share-capital is held by Germans, 
while the debentures, the moderate interest on which does 
not attract the Germans, are placed in Switzerland. Thus, 
as the Gazette de Lausanne summed it up, " The money of 
the Swiss debenture-holder serves to support German un- 
dertakings competing with Swiss manufacturers in our own 
country." 

A remarkable study of the same subject in Italy has been 
made by M. Giovanni Preziosi in some articles which ap- 
peared in 1914 in the Vita italinna all' estero, and were 
collected in pamphlet form in 1915 under the significant 
title. ■' Germany's Plan for the Conquest of Italy" (La 
Gerniania alia conquista dell' Italia). It was indeed a 
war of conquest, conducted with admirable organizing fac- 
ulty. At its centre was a financial staff, constituted by the 
"Banca commerciale . . . italiana," which naturally is called 
" Italian," just as the companies in France are called 
" French " or " Parisian." This product of German finance 
is described as a " Germanic octopus," the very image of the 



" tentacular State " before described. Establishing itself 
within the directing boards, and, by means of a system of 
secret cards, employing a regular system of commercial 
espionage to ruin all who resist it, it succeeded in gradu- 
ally absorbing the economic energies of an entire people — 
establishments of credit, shipping companies, manufactur- 
ing firms; it was even able to corrupt political life, over- 
throw ministries and control elections. Here, as in Switzer- 
land, the pseudo-Italian German banks " act as a pump 
which pumps out of Italy and pumps into Germany." 
Italy, which is considered a poor country, provides capital 
for rich Germany. 

To back up this policy of economic conquest the prestige 
and the strength of the Empire must be put at the service 
of the manufacturers. To make the State, as the Germans 
understand it, the instrument of German expansion — this 
is the meaning of what the Germans have well named the 
policy of " business and power " Handels und Machtpolitik. 
Nowhere is the confusion of the two ideas more clearly ex- 
hibited than in the report forwarded to London in Febru- 
ary, 1914, by Sir Edward Goschen, on "An Official German 
Organization for Influencing the Press of Other Countries." 
Tliis important document is too little known in France, 
perhaps because, outside the Blue Book, it has not appeared 
in England except as an ordinary " White Paper." But how 
instructive it is! 

The Norddeutscher Lloyd, the Hamburg-Amerika, the 
Deutsche Bank, the Disconto Gesellschaft, the A. E. G. 
(AUgemeine Elektrizitatsgesellschaft), the Siemens- 
Schuckert, Krupp, and Gruson Companies, etc., form a pri- 
vate society, subsidized by the Imperial Office for Foreign 
Affairs. The object of this company, in co-operation with 
the Wolfl Bureau, is to promote the manufacturing pres- 
tige of Germany abroad. It will supply full information 
gratuitously or at a low price to foreign journals in their 
own language concerning Germany and favorable to Ger- 
many. It will withhold the service from those who show 
themselves deaf to instruction. " To reply to news meant 
to influence opinion on Germany and to meet attacks upon 
her, and to make the true situation of German industry 
widely kno%vn " — such is the program. In a word, the 
object is the organization of a spy-system for industry — I 
use the phrase of Signor Preziosi — under the control of the 
Empire. And, as is fitting in such a system, the work of 
Germanizing the Press of the world will not be done by 
publicists sent for the purpose: they would very soon be 
burnt. In an article so naively transparent that its publi- 
cation was thought inopportune and orders came from above 
not to reproduce it or make any allusion to it, the Deutsche 
Export Revue crudely remarked: "It is better to choose 
men already connected with the various journals, who will 
serve German interests without attracting so much atten- 
tion." 

This fusion of Weltpolitik and business policy was pecu- 
liarly dangerous for the peace of the world. If Imperial- 
ism, if " the tentacular State " puts its strength at the dis- 
posal of manufacturing interests, the temptation is strong 
and constant to use this strength to break down any resist- 
ance which stands in the way of the triumph of these in- 
terests. If a crisis comes which causes a stoppage of work 
(there are sometimes 100,000 unemployed in Berlin) the 
neighboring nation which may be held responsible for the 
crisis has reason to be on its guard. " Be my customer or 
I will kill you " seems to be the motto of this industrial 
system, continually revolving in its diabolical circle; al- 
ways producing more in order to sell more, always selling 
more in order to meet the necessities of a production al- 
ways growing more intensive. 



SOURCE MATERIALS OX ECOXOMIC ASPECTS OE 'J'l fi: W \U. 



Russia is for Germany both a reservoir of labor and a 
market. Should Russia in 1917 refuse to renew the disas- 
trous treaty forced upon her in the unlucky days of the 
Japanese war, should she i)ut an end to the system of pass- 
ports for agricultural laborers, what will become of Ger- 
man capitalist agriculture, which has been more and more 
industrialized and is more and more in the hands of the 
banks: the farming of the great estates of Brandenburg, 
Pomerania and Prussia? 

France is for Germany a bank and a purveyor of min- 
erals. What a temptation to dip deep into the jealously 
guarded stocking and fill both hands! What a temjitatiou, 
too, to repair the blunder made in the delimitation of 1871! 
Even in 1911 the Ga:.ette dii Rhin et dc Westphalie put 
forward the view that the iron ores of Lorraine and Luxem- 
bourg ought to be under the same control as those of West- 
phalia and the Saar. And I am told that the great jour- 
nals of Paris, when informed of this campaign, refused to 
take tills " provincial journal " seriously, being blind to 
the fact that it was the organ of the great manufacturers 
of the Rhineland and of the Prussian staff. What a 
temptation again to take the ])ort of Cherbourg in the rear 
from UiOlette ! 

As for England, the direct competitor of Germany in all 
the markets of the workl, and manufacturing the same 
goods, she is the enemy to be crushed. Has she not ac- 
quired the habit, and has she not taught it to France, of 
refusing to lend money to poor States except in return for 
good orders? Tlie time is beginning to go by when it was 
possible to do German business in Turkey with French or 
English gold. Germany's rivals have learnt from her the 
lesson of Handels und Machtpolitik. But what is to become 
of Essen, Gelsenkirchen, and all that immense industrial 
city of which Westphalia consists, if Roumanians, Greeks, 
Serbians order their guns and their ironclads, their rails or 
their locomotives at Glasgow or at Le Creusot? Germany 
thought war preferable to this economic encirclement, and 
the velvet glove gave place to the mailed gauntlet. 

Little by little the idea of war as necessary, of war as 
almost a thing to wish for, laid hold on the industrial 
classes. The proof is to be found as early as 1908 in a 
popular book by Professor Paul Arndt, one of those small 
shilling books which served to instruct the German mind. 
All of us, even the best informed, must reproach ourselves 
for not having studied or studied closely enough these 
small books, which would have made the danger clear to us. 
In this volume the author, after a pa;an to German great- 
ness, begins a chapter " On the dangers of Germany's par- 
ticipation in world-wide trade." He shows that this par- 
ticipation increases (iermany's dependence on the foreigner 
and makes her vulnerable by sea as well as by land. If in- 
ternational relations are disturbed there will be " many 
workmen without food, and much depreciation of capital," 
and that from causes " in great measure beyond tlie control 
of Germany " in countries which may seize the opportu- 
nity to weaken Germany. And in a hypothesis which is 
prophetic he describes the effects of the blockade. 

But he accepts without hesitation these risks of the 
World-Policy. " Xo doubt, if we wish to be and to re- 
main a great people, a world power, we expose ourselves to 
serious struggles. But this must not alarm us. There is 
profound truth in the dictum that man degenerates in peace 
times. Tlie call to arms is often needed to rouse a world 
henumbed with apathy and indolence. Tliosc who can look 
far and deeply into tlii.igs see that warfare is often a bless- 
ing to humanity." Tliis German is a disciple of Joseph de 
Maistre. 



i have shown how the over-rapid industrialization ot Ger- 
many has led by a mechanical and fatal process to the Ger- 
man war. If any doubt were felt on the part played by 
economic causes in this war it would be enough to look at 
the picture of German victory as imagined by the Germans 
in their dreams during the last seven months. It is au 
industrial victory, a forced marriage between German coal 
and foreign iron, the reduction of nations into vassals who 
are to play the part of perpetual customers of the German 
workshops. 

'■ The metalliferous strata of French Lorraine and Rus- 
sian Poland," wrote Baron Zedlitz-Neukirch three weeks 
ago, " supplement in some degree our own mining works." 
If we ask the impetuous Max Harden what is to become 
ot martyred Belgium, he replies, in October, 1914, "Ant- 
werp not against Hamljurg and Bremen, but with them; 
Liege, working side by side with the arms factories of 
Hesse, Berlin and Suabia; CockeriU in alliance with 
Krupp; Belgian and German iron, coal and textiles under 
one control. . . . From Calais to Antwerp, Flanders, Lim- 
bourg and Brabant, up to and beyond the line of fortresses 
on tlie Meuse, all Prussian." The German dream is the 
dream of a conquering man of business, a counting-house 
romance founded on Frcy tag's iioll und llahcn (" liebit and 
Credit"). 

The war they thought would be the solution of colonial 
questions. In the tragic days at the end of July, 1914, 
Bethmann-HoUweg offered England to maintain the conti- 
nental integrity of France (German industry would be con- 
tent with the economic annexation of France), but refused 
any pledge to respect French colonies, and especially North 
Africa. In September they had the audacity to offer, as 
the price of a desertion of which they thought us capable, 
to divide with us the Belgian Congo, towards which the 
treaty of 1911 had allowed them to put out two feelers. 
A German used this candid language: "We have need of 
France, because we cannot claim the government of the 
whole non-English colonial world." At the same time they 
attempted by stirring up revolt among the Boers and by 
attacks on Portuguese colonies to build up a German Em- 
pire in South Africa. Tlie victory of Germany meant for 
tlieni security of iron-supply and enlarged nnirkets; it 
meant Bricy, Oucnza, Casablanca, Bagdad. 

Tlie vision has faded and the building of tlieir dreams 
has crumbled away. But the dream has left its lessons for 
us, which demand attention not only in the future but to- 
day. Let us cherish no illusions. Germany, though con- 
quered and curtailed, will not cease to exist. It is idle to 
siqipose, as some publicists write, that we arc going to sup- 
press a whole people. Even if we had the military power 
to do it, policy and morality would forbid us! ."^fter our 
victory there will once more be a Germany which will pa- 
tiently and persistently resume its labors. The great war 
will no sooner be ended than the other war, the economic 
war, will begin again. If we do not wish to be crushed we 
must to-day begin to prepare our mobilization for this new 
war. I 

Grk.at BiuTAix's Oi'EN Door Policy. 

That England was even more an industrial state 
than Germany is well known. But at no time in her 
jiistory a.s an indu.slrial .state has there been any at- 
tempt to establish a monopoly of coal, iron or other 
raw materiahs. Instead she adopted a free trade pol- 

1 M. Henri Hauser, Economic Onmnnji. Translated hy 
P. E. Matheson. Bulletin, Mav-June, 191.5. 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



icy which not only opened her markets to all the 
world, but made impossible any such insidious par- 
ticipation by the British government in commerce as 
that practiced by Germany. Men of all nations could 
trade in her markets and harbors on the same footing 
as her own subjects. There were no cartels, under- 
selling and " dumping," with the backing of an Im- 
perial TariiT manipulated by an upper group (" so- 
ciety ") of unscrupulous financiers and imperialists 
practically in control of the entire capital wealth of 
the land. There was no mushroom growth of Welt- 
politik fused with big business to force economic 
penetration at Antwerp, Milan, Zurich, Petrograd, 
etc. 

The War and Commerce. German vs. British 
Methods. 

It was to be expected, therefore, that the policy of 
the two Powers with regard to the overseas supply of 
food and raw materials would differ radically. The 
German policy is illustrated in the infamous sub- 
marine order of February 4, 1915. It reads: 
German Submarine Order. 
Proclamation. 

1. The waters of Great Britain and Ireland, including the 
whole English Channel, are hereby declared to be war zone. 
On and after the 18th of February, 1915, every enemy mer- 
chant ship found in the said war zone will be destroyed 
without its being always possible to avert the dangers 
threatening crews and passengers on that account. 

2. Even neutral ships are exposed to danger in the war 
zone, as in view of the misuse of neutral flags ordered on 
January 31 by the British Government and of the accidents 
of naval war, it can not always be avoided to strike even 
neutral ships in attacks that are directed at enemy ships. 

.3. Northward navigation around the Shetland Islands, in 
the eastern waters of the North Sea. and in a strip of not 
less than 30 miles width along the Netherlands coast, is in 
no danger. 

Von Pohl, 
Chief of the Admiral Staff of the Navy. 
Berlin, February 4, 1915. 

Comment is unnecessary. The proclamation has 
in it all the possibilities of the tragic sinking of the 
Lusitania, the Sussex and other vessels, and should 
be contrasted with the recognized rules of maritime 
warfare in regard to neutral or belligerent ships sus- 
pected of carrying contraband. The proclamation 
should also be read in connection with President 
Wilson's "Address on Germany's Renewal of Sub- 
marine War against Merchant Ships " two years 
later. For tlie extension of tin- submarine .area see 
subsequent submarine orders. 

Great Britain replied in an Order in Council of 
March 15, 1915, which is in strict conformity with 
the Rules of Maritime Warfare. It reads in part: 

Whereas, the German Government has issued certain 
orders which in violation of the usages of war, purport to 
declare the waters surrounding the United Kingdom a mili- 
tary area, in which all British and allied merchant vessels 
will be destroyed, irrespective of the safety of the lives of 
passengers and crew, and in which neutral shipping will be 



exposed to similar danger in view of the uncertainties of 
naval warfare; . . . 

His Majesty is therefore pleased, by and with the advice 
of his Privy Council, to order and it is hereby ordered as 
follows: 

1. No merchant vessel which sailed from her port of de- 
parture after the first of March, 1915, shall be allowed to 
proceed on her voyage to any German port. 

Unless the vessel receives a pass . . . 

2. No merchant vessel which sailed from any German 
port after the first of March, 1915, shall be allowed to pro- 
ceed on her voyage with any goods on board laden at such 
port. 

All goods laden at such port must be discharged in a 
British or allied port. . . . 

3. Every merchant vessel which sailed from her port of 
departure after the first of March, 1915, on her way to a 
port other than a German port, carrying goods with an 
enemy destination, or which are enemy property, may be 
required to discharge such goods in a British or allied port. 

4. Every merchant vessel which sailed from a port other 
than a German port after the first of March, 1915, having 
on board goods which are of enemy origin or are enemy 
property may be required to discharge such goods in a Brit- 
ish or allied port. . . . 

Here, too, are found the seeds of much of the 
allied policy of trade control developed to such a high 
degree of efficiency later through the co-operation of 
the United States. The matter of contraband trade 
was taken up in subsequent Orders in Council, and 
the list of contraband articles rapidly extended. The 
question should be studied in connection with the 
Declaration of London, February 26, 1909. The 
most serious problems from the point of view of the 
Allies, however, was not the direct enemy trade, but 
trade with enemy destination through neutral terri- 
tory. The faltering steps by which an effective 
method of control over this was finally reached can- 
not be illustrated here. In principle the program 
rested on the right of search and of blockade. In 
practice, it depended on a virtual blockade main- 
tained across the North Sea from Scotland to Nor- 
way, of the Channel and the Straits of Gibraltar 
against all commerce with the enemy. 

Neutral rights as they had been formulated since 
the days of the Napoleonic wars were slightly in- 
fringed, but these were minor ills by the side of the 
ravages of the submarine. Besides, evidence of an 
increasing trade with the enemy through the neutral 
ports of Holland, Sweden, Denmark and Italy soon 
appeared, and Sir Edward Grey's stand before Par- 
liament seemed well taken. 

" There is here a trade which almost every kind of Ger- 
man commerce can pass almost as easily as through the 
ports of her own territory. ... If the blockade can only be- 
come effective by extending it to the enemy commerce iiass- 
ing through neutral ports, such an extension is defensible." 

In accordance with the suggestion more rigorous 
plans to suppress the trade were adopted. Not only 
were neutrals asked to report at alien ports for 
examination of the cargo, but a plan was finally 
evolved by which the neutral nations behind the lines 
of allied trade control were induced to conduct all 



SOURCE ^[ATERIALS OX ECONOMIC ASPECTS OE THE W \l! 



their overseas trade through organizations in London 
or under direct allied control. 

But there continued to be a great many difficulties, 
till the entry into the war by the United States with 
the participation of this country in the control and 
direction of overseas trade, practically all difficulties 
were met. The Allies now had absolute control of 
raw products, coal bunkers and coaling stations. The 
vigor and promptness with which this new advan- 
tage was brought into play appears in the steps taken 
by tliis country not only against neutral trade, but 
also towards its own. 

The United States Takes a Hand in Trade 
Control. 

In October, 1917, President Wilson created the 
War Trade Board, which, co-operating with the In- 
terallied Chartering Executive, rapidly brougiit the 
commerce of the world under control. The Board 
was created and operates under the Espionage Act 
(approved June 15, 1917). 

" To punish acts of interference with the foreign 
relations, the neutrality, and the foreign commerce of 
the United States to punish espionage, and better to 
enforce the criminal law of the United States, and 
for other purposes." 

Title VII of Section 1 of the act reads: 

Whenever during the present war the President shall find 
that the public safety shall so require, and shall make pro- 
clamation thereof, it shall be unlawful to export from or 
ship or take out of the United States to any country named 
in such proclamation any article or articles mentioned in 
such proclamation, except at such time or times, and un- 
der such regulations and orders, and subject to such limita- 
tions and exceptions as tlie President shall prescribe, until 
otherwise ordered by the President or by Congress. Pro- 
vided, however, that no preference shall be given to the 
ports of one State over those of another. 

To carry out the policy, a system of licensing ex- 
ports and imports was adopted. The first proclama- 
tion was issued on July 9, 1917, and is entitled 

Proclamation Prohibiting Exports of Coal, Food 
CJrains, Meats, Steel, and other Products except by 
License." (Cp. also the later proclamations of Feb- 
ruary I K Ii)l8.) 

In connection with these proclamations, the War 
Trade Board issued the following statement: 

" Tlie purpose and efloct of these proclamations are to 
subject to control by license the entire foreign commcrco of 
the United States, and from and after February 10, 191H, 
no commodities may be exported from this country or im- 
ported into this country except under license. 

The President has heretofore issued several proclamations 
controlling certain exports under the provisions of I'iile 
VII of the Espionage Act, and one proclamation control- 
ling the importation of certain commodities under the pro- 
visions of section 11 of the Trading with the Enemy Act. 
Tlie military situation and the tonnage situation have made 
increasingly apparent the necessity of instituting a com- 
plete and thoroughgoing control of all our exports and im- 
ports. 

The transportation of our armies to France and the main- 
tenance of a continued flow of the supplies and munitions 
needed to maintain them in fighting trim require the use 



of every ton of shipping which can possibly be devoted to 
these purposes. This demand must be met, and if it be- 
comes necessary to curtail our exports or imports, these are 
measures which are forced upon us by the critical tonnage 
situation and the necessity of availing ourselves of every 
possil)le means of maintaining our armies in France. The 
limitation of exports is necessivry also to conserve the prod- 
ucts of tliis country for the use of our own people and the 
peoples of the nations associated with us in the war; wa 
must dispose of tiiis surjilus in such a way as to aid, as 
far as possible, those countries to the south which have al- 
ways depended upon us; we must also dispose of our sur- 
plus in such a way that Germany and her allies will derive 
no benefit therefrom; and we must secure for ourselves in 
return shipping and supplies urgently needed. 

The promulgation of these two proclamations does not 
mean an embargo on exports or a prohibition of imports, 
but places in the hands of the President the power to reg- 
ulate, which will exercise through the War Trade BoanI 
and the Treasury Department. This power will be exercised 
with the single purpose of winning the war, and every 
effort will be made to avoid unnecessary interference with 
our foreign trade and to impose upon our exporters and im- 
porters no restrictions except those involved in the accom- 
plishment of definite and necessary objects. 

As heretofore, licenses for the export or import of coin, 
bullion, currency, evidences of debt or of ownership of 
property, and transfers of credit will be issued by the Treas- 
ury Department; licenses for all other exports and imports, 
including merchandise, bunkers, ships' supplies, etc., will be 
issued by the War Trade Board. - 

.Minute regulations in regard to the licenses have 
also been issued from time to time, and the list of 
commodities subject to license was rapidly enlarged. 
Authority for this was vested in the Board by the 
Executive Order winch brought it into existence. 
Thus the first articles read: 

I. I hereby establish a War Trade Board to be composed 
of representatives, respectively, of the Secretary of State, 
of the Treasury, of the Secretary of Agricult\irc, of the 
Secretary of Commerce, of the Food Administrator and of 
the United States Shipping Board. 

II. I hereby vest in said Board the ]iower and authority 
to issue licenses under such terms and conditions as are not 
inconsistent with law, or to withhold or refuse licenses, for 
the exportation of all articles, except coin, bullion or cur- 
rency, 3 the exportation or faking of wliich out of the United 
.States may be restricted by proclamations heretofore or 
hereafter issued by me under said Title VII of the espionage 
act. 

lit. I further hereby vest in said War Trade Board the 
power and authority to issue, upon such terms and condi- 
tions as are not inconsistent with law, or to withhold or 
refuse, licenses for the importation of all articles the im- 
portation of which may be restricted by any proclamation 
hereafter issued by me under section II of the trading with 
the enemy act. 

That the War Trade Board, like all the other War 
Boards created by tlic President, lias exercised the 
broad powers conferred upon it with extraordinary 
boldness and efficiency, the following excerpts from 
its General Rules show. Thus: 

- Rules and Regulations of the War Trade Board, No. 2, 
p. 9. 

^ On the prol)lcm of coin and bullion, see proclamation of 
September 7, i'M7 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



No vessel shall be allowed to clear from any port of the 
United States, or any United States possession, without 
having secured a license or licenses from the War Trade 
Board, through its Bureau of Transportation, covering all 
the bunker fuel aboard the vessel at the time of sailing 
(including coal, coke, oil, kerosene, and gasoline), and port, 
sea, and ship's stores and supplies. Stores and supplies 
are for convenience hereafter included with bunker fuel 
under the general designation of " bunkers." . . . 

II. No application for bunkers by any vessel which has 
disobeyed any order of the United States Navy or of the 
United States Shipping Board, hereinafter called " Ship- 
ping Board," shall be approved. 

\'. 1. No vessel shall proceed on any voyage or be char- 
tered on trip or time charter without the previous consent 
of the War Trade Board or the Interallied Chartering Ex- 
ecutive. 

y. o. No vessel shall be bought or sold without the pre- 
vious approval of the United States Shipping Board, War 
Trade Board or of the Interallied Chartering Executive. 

V. p. No vessel shall be laid up in port without the ap- 
proval of the War Trade Board or the Interallied Charter- 
ing Executive. 

Equally stringent and unprecedented are the regu- 
lations governing neutral trade quite outside the 
United States and the Allies. Thus General Rules 
V. f.: 

No vessel shall carry from a port outside the United 
States to any European port cargo which has not been pre- 
viously approved by the Wnv Trade Board or the Interallied 
Chartering Executive. 

V. e. Every vessel which proceeds from or to the United 
States, to or from Norway, Sweden, Denmark (including 
Iceland and the Faroe Islands), Holland, Spain, or to or 
from any neutral port in the Mediterranean Sea, shall call 
for examination as may be directed by the War Trade 
Board.* 

Control atsib Mobilization of Industry. 

This rigorous trade control represents one phase, 
a very important phase, of the economic warfare 
waged by the Allies against the Central Powers. 
Quite as complete has been tlie control and mobiliza- 
tion of industry and transportation. Immediately 
upon her entry into the war Great Britain took over 
the control and direction of her railroads. Slie en- 
tered the markets of the world as a buyer of raw 
sugar, grain, cotton, rubber and other necessities. 
Wlicn difficulties over the beef situation developed 
and the price began to soar, the government, through 
the president of the Board of Trade, commandeered 
the ships with refrigerating space, whereupon the 
packers were obliged to negotiate on even terms. 

With the example of the Allies before her, the 
United States advanced with phenomenal rapidity in 
matters of governmental control. 

A typical phase of the process is illustrated by the 
action of the government in the matter of food. This 
is clearly brought out by the United States statute of 
August 10, 1917, entitled an Act authorising Con- 

■1 War Trade Board Journal, No. V. Tlie general policies 
of the War Trade Board are set forth in its first annual 
report published in its oflicial organ, the ITrtr Trade Hoard 
Journal, No. VII, pp. 15-10. 



S: 



irul of Food and Coal, and the President's proclama- 
tion " Calling for a Reduction of Consumption of 
Wheat and Meat," January 18, 1918. Essential in- 
dustries, like shipbuilding, the railroads, express com- 
]ianies, the telegraph and telephone lines, labor em- 
ployment, etc., were one after another taken over. 
On tlic subject of the railroads compare the Act to 
Authorize Control of Transportation and the Presi- 
dents proclamation "Announcing the Taking Over of 
Railroads," December 26, 1917. 

On the mobilizing of American labor and the effort 
at solving the labor problem, compare the President's 
proclamation " Concerning the National War Labor 
Board " and the following interesting letter from the 
Secretary of Labor: 

To THE Thikty-five Thousand Foub Minute Men : 

America's man power is needed to its utmost. We can- 
not afford to waste another ounce of energy. 

Hence the Government's program to mobilize American 
industry; to induce employers to get their help and em- 
ployees to get their jobs through a central governmental 
agency — the United States Employment Service of the De- 
partment of Labor. 

This sweeping plan is a war measure. It is necessary, 
urgent. If you want America to win, then support the pro- 
gram with full zeal. Cooperation of industry is to-day 
necessary. 

Furthermore, this step marks, in indirect ways, a stride 
forward in the relations of man to man. We are laying 
new foundation stones for democracy. 

Feeling the vital need of explaining the plan to the 
American people, I have asked and secured the services of 
the Four Minute Men. I have seen the remarkable results 
you have accomplished for other departments of the Gov- 
ernment. I realize the effectiveness of the simultaneous 
messages delivered by this great army of earnest speakers. 

When you now take up the question of labor, explaining 
to all men who work, whether they work with a shovel, or 
at the lathe, or in the office, the need of co-operation at this 
time, I feel that you are delivering a message second to 
none in immediate and in permanent importance. 

Cordially yours, 

W. B. Wilson. 

Problems of Reconstruction. 

It merits attention not only because of the evi- 
dence of the extension of government control, and of 
at least one of the many ways it developed to edu- 
cate the American people as to its aims and policies in 
the conduct of the war, but also because of the deep- 
seated social problems it suggests. How significant 
the latter will be in the great task of reconstruction 
after the war is already apparent from many signs and 
events. To the problem of the adjustment of labor has 
been added the enormous question of millions of 
women workers ; to the questions of social or private 
control and ownership, the hard facts of the sweeping 
extension of the former under war conditions, while 
Bolshevikism has added itself to the phases of social 
and political anarchy. In view of this, the main 
points of the proposed program for the British Labor 
Party, which has received wide circulation, may be 



SOLRCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR. 



quoted in part as expressing the ideas on reconstruc- 
tion of many Laborites and Socialists. It says: 

What we now promulgate as our policy, whether for op- 
position or for ollice, is not merely this or that specific re- 
form, but a deliberately thought out, systematic, and com- 
prehensive plan for the immediate social rebuilding which 
any ministry, whether or not it desires to grapple with the 
problem, will be driven to undertake. The four pillars of 
the house that we propose to erect, resting upon a common 
foundation of the democratic control of society in all its 
activities, may be termed: 

(a) The Universal Enforcement of the National Mini- 
mum; 

(b) The Democratic Control of Industry; 

(c) The Revolution in National Finance; and 

(d) The Surplus Wealth for the Common Good. 

British and American Government Agencies for 
Economic Mobilization. 

The extraordinary role played in this war by the 
economic life of the belligerent nations and the de- 
termined steps by all to mobilize agriculture, indus- 
try, commerce, and labor (both of men and women), 
not to speak of education for war ends, is graphically 
illustrated by the following diagrams showing the new 
departments created by Great Britain and the United 
States to meet this need. 

It is a matter of considerable interest to the stu- 
dent of comparative government to note how difFer- 
tntly the machinery of government has been adapted 
to the great economic needs of the war. In Great 
Britain the Cabinet has been expanded by the crea- 
tion of new cabinet posts, the incumbents of which 
become regular members of that body. With us, on 
the contrary, the new posts have been established in 
connection with one or other of the Cabi!U't secre- 
taryships already in existence, and their work is car- 
ried under the direction of the members of the Presi- 
dent's Cabinet. In making this comparison, how- 
ever, the fact that there is in Great Britain a very 
powerful Inner War Cabinet, would indicate that in 
England the development has gone in both direc- 
tions. In both cases the willingness of democracies 
to confer almost unlimited power on tiieir great lead- 
ers is altogether unprecedented, a point to be kept 
in mind in the study of the Overman Bill of May 20, 
1918, An Act authoriz'vKj the President to co-ordi- 
nate or consolidule e.rccutive bureaus, arienries, and 
offices, and for other purposes, in the interest of 
economy, and the more efficient concentration of the 
f/overnjnent. 

Enemy and United States War Aims Contrasted. 
I'"inally. it is worth whih' to pl.-icc side by sU\r 
with the iitt.erances of tiu' Pnsiihnt upcui ll'ar 
.■Urns and Peace Terms in his mi uioralili- addresses 
on tlir subject some of the exitrcssioiis made bv 
tlie leaders of the enemy aiul of the economic rx.ic- 
tions wrested from Russi:i and Roum.ini:i. Con 
trast. for example. President Wilson's cliampion 
ship of tlie cause of sin.all nationalitiis and the 
eloquent ))lea for little Belgium with tlie rutiilcss 
confession of materialism and the gospel of power 



revealed in the testament of von Bissing, Governor 
General at Belgium, during the first years of the war: 

It is, therefore, absolutely necessary to prevent Belgian 
industry from serving the armament policy of our enemies. 
'J'hc advantages ichich we luive been able during the present 
irar to obtain from lielgian industry, by the removal of 
■mnehinery and so on, are as important as the disadvan- 
tages which our enemies have sutl'ered through lack of this 
addition to their fighting strength. . . . 

No, our frontier — in the interest also of our sea power — 
must be pushed to the sea. 

The immediate importance of the Belgian industrial dis- 
tricts for our conduct of the war by no means exhausts the 
subject. The war of weapons will in the future be accom- 
panied by a harder economic war than is the case to-day. 
Without coal what would have become of our policy of in- 
dustrial exchange, not only with Holland, but also with far 
distant northern countries? The annual Belgian produc- 
tion of 23.000,000 tons of coal has given us a monopoly on 
the continent, which has helped to maintain our vital- 
ity. . . . 

.Just as was the case before the war, a neutral Belgium, 
or an independent Belgium, based upon treaties of a differ- 
ent kind, will succumb to the disastrous influence of Eng- 
land and France, and to the effort of America to exploit 
Belgian resources. Against all this our only weapon is the 
policy of power, and this policy must see to it that the Bel- 
gian population, now still hostile to us, shall adapt itself 
and subordinate itself, if only gradually, to German domi- 
nation. It is also necessary that, by a peace which will 
secure the linking up of Belgium with Germany, we shall 
be able to give the necessary protection to the Germans 
who have settled in the country. Tliis protection will be of 
quite special importance to us for the future battle of the 
world markets. In the same way it is only by complete 
domination of Belgium that we can utilize for German in- 
terests the capital created by Belgian savings and the Bel- 
gian companies which already exist in large luimbers in 
the countries of our enemies. We must keep under our 
control the considerable Belgian a<'cumulations of capital 
in Turkey, the Balkans and China. . . . 

Tt is true that we must protect the Flemish movement, 
but never must we lend a hand to make the Flemings com- 
])letely independent. . . . 

Belgium must be seized and held, as it now is. and as it 
must be in the future. . . . 

If only on account of the necessary bases for our fleet, 
and in order not to cut off .Xntwerp from the Belgian trade 
area, it is necessary to have the adjacent hinterland. 

Were these the words of an isolated extremist, 
they would have no pl.ice in this collection. That 
they are not can be readily ascertained by compar- 
ing von Hissing's ideas willi the utterances of tlie 
Pan-Cierman group both before the war and since, 
.'ind with the statements of her men in power from 
Betiimanii-Hollweg's " Scrap of P.iper " to Kuelil- 
inann's latest idea that ' Belgium must be held as a 
pawn." 

Economic E.vactioxs irom Rcssia and Rou.mania. 

Such. then, are the peace purposes of Germany, 
both expressed and actually imposed upon those 
states over which she has been temporarily victor- 
ious. They cannot be too often contrasted with 
those of the United States as formulated by Presi- 
dent Wilson in the proclamation referred to above. 



10 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 


























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FEDERAL EXECUTIVE 

COMPILED FOR THE 
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8V WALTER I. SWANTON 
WASHINGTON. C 



DECEMBER 1 1917 



SOURCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR. 



11 



CHART SHOWING 



The Administrative Organization of the British Government and 
Its Development during the War 



Members of supreme Wvr Council 



Great Britain 

France 

Italy 

United States 










.// y/ ^.- /■ s/ C-/-S, 



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This Chart ahows the formation of the Government during 1917, with the War Cabinet sitting as a permanent 
body, the Imperial Cabinet meeting periodically, and the Ministers with Portfolio. 



-Ministers with Portfolio previous to 1914 
Ministers with Portfolio created since 1014 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



Russia and Roumania have been forced to conclude 
peace on terms that leave no room for doubt as to 
Germany's determination to exploit the economic 
possibilities of her conquests to the utmost limit. The 
main supplementary treaty of Brest-Litovsk between 
the Central Powers and the Bolsheviki throws a lurid 
light on this lust for conquest. Article I practically 
provides for the absorption of Esthonia and Livonia, 
for after establishing the eastern frontier of these 
provinces, it says: 

" Germany will evacuate without delay the territory oc- 
cupied by her to the east of the frontier." 

'I'lie evacuation of other Bolshevist territory was to 
take place gradually in proportion as the Bolsheviki 
paid tlie installments on the indemnity of 6,000,000,- 
000 marks. 

Article III says: 

" Germany will even before the conclusion of a general 
peace evacuate the territory occupied by her to the east of 
the Beresiua according to the measure of cash payments 
which Russia has to make; the further provisions about 
this, and especially the determination of the various sectors 
to be evacuated, are left to the demarcation commission. 
Tlie contracting parties will make further agreements con- 
cerning evacuation, before the conclusion of a general peace, 
of the occupied territory to the east of the Beresina, ac- 
cording to the measure of cash payments which Russia has 
to make; the further povisions about this, and especially 
the determination of the various sectors to be evacuated, 
are left to the demarcation commission. The contracting 
parties will make further agreements concerning evacua- 
tion, before the conclusion of a general peace, of the occu- 
pied territory to the west of the Beresina, according to 
the measure of the fulfillment of the other [sic] finan- 
cial [arrangements] of one billion marks in value. A 
further sum of two and a half billion marks the Bolshevists 
were to issue as a loan at six per cent, and secured by spe- 
cial State revenues, especially by the revenue from " certain 
economic concessions which are to be granted the Germans." 

A further billion marks was to be wrung from the 
Ukraine and Finland through the Bolsheviki, and if this 
was impossible some other arrangement with the latter. 

Article XIV makes a German enclave of Baku, the great 
petroleum center of Russia, and provides that at least a 
quarter of the production be for Germany. 5 

The articles dealing with economic matters in the 
Roumanian treaty and the treaty with the Ukraine 
show the same disposition at distraint and levy. 

Among the economic problems in the establish- 
ment of an enduring peace, the distribution of Eu- 
rope's coal and iron and the control of raw materials 
generally will be of the utmost importance. The 
semi-official Vossische Zeitung and other journals in 



s These excerpts from the Brest-Litovsk Treaty are quoted 
in the London Times, Saturday, September 14, 1918, and 
based, so the article says, upon the published text of the 
treaties in the German press. 



commenting on the creation of the new ministry called 
the " Imperial Department of Economics," lay great 
stress on this phase of its functions. They say in 
substance: 

■• Economic reconstruction after the war can be effected 
only by the rapid acquisition by Germany of all essential 
raw materials. Access to the raw materials of the world 
is, therefore, the first and most determined aim of the pres- 
ent reconstruction preparations. The grouping amalgama- 
tion and consolidation of tlie greater industries under a 
central control and the foundation of import and export 
companies are being undertaken in order to speed up and 
facilitate the buying and selling of raw materials, and ulti- 
mately to provide an organization for mass — and whenever 
possible — standardized production." 

Does this mean that the trade methods described 
by Professor Hauser are to be revived and intensi- 
fied } The nationalistic economic philosophy preached 
by German economists from List to Wagner that war 
is a by-product of economic rivalry, not between in- 
dividuals, but between sovereign social groups, is ap- 
parently still dominant in the minds of the leaders 
of Germany. 

In view of this it is of interest to learn from Sir 
Robert Cecil that the economic conference of Paris 
between eight powers has been expanded into an al- 
liance of twenty-four allied nations, the great and 
primary object of which is no longer some narrow 
defensive alliance, but the determination and laying 
down of the economic principles of the Association of 
Nations which is already in existence. ° 

Similarly President Wilson's statement in his an- 
nual address before Congress on December 4, 1917, 
in which he says: 

" If the German people continue to be obliged to live un- 
der ambitious and intriguing masters interested in disturb- 
ing the peace of the world, men or classes of men whom the 
other peoples of the world could not trust, it might be im- 
possible to admit them to the partnership of nations which 
henceforth must guarantee the world's peace ... or to free 
economic intercourse. . . . " ' 

On the other hand, it should not be overlooked that 
President Wilson has been consistently opposed to a 
peace involving the necessity of a continuation of the 
war in an economic form. Thus in the same address 

he says: 

" You catch with me the voices of humanity that are in 
the air. . . . They insist that the war shall not end in vin- 
dictive action of any kind; that no nations or peoples shall 
be robbed or punished because the irresponsible rulers of a 
single country have themselves done deep wrong. . . . The 
wrongs, the very deep wrongs committed in this war will 
have to be righted. That, of course. But they cannot be 
righted by the commission of similar wrongs against Ger- 
manv and her allies." 



6 Statement by Sir Robert Cecil of July 14 as reported in 
the public press. 

f President Wilson's Annual Message, December 4, 1917. 



SOURCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR. 



13 



Effect of the War on the Supply of Labor and Capital 

BY PROFESSOR ERNEST L. BOGART, UNIVERSITY OF ILLINOIS. 



Such a subject as this is of course largely one of 
prediction. The problem is to determine, on the 
basis of known facts, what may reasonably be ex- 
pected to happen on the return of peace. But by 
limiting the inquiry to the larger aspects of two 
phases only of the vast problem of economic readjust- 
ment after the war, it is possible to draw a few con- 
clusions. 

1. Population and the labor supply. During the 
nineteenth century the population of Europe doubled, 
tlie rate of growth being somewhat more rapid in 
Russia and Germany, which trebled their population, 
while France lagged behind the other countries with 
only a thirty-five per cent, increase. The war has 
now stopped this population growth, and has substi- 
tuted for it the destruction of human life. If the 
war lasts five years, we shall be safe in estimating the 
loss of human life, on the basis of known fatalities, 
at 25,000,000. This is the direct war loss. In ad- 
dition we must calculate the deaths of children and 
old people from ill-treatment, malnutrition, and ex- 
posure. It is stated, for instance, that not a child 
born in Poland since the outbreak of the war has sur- 
vived ; there has been a grave increase in tuberculosis 
and other pulmonary diseases, and in dysentery, 
typhoid, and cholera in most of the belligerent coun- 
tries. Europe will emerge from the war with a seri- 
ous loss of population and a shortage of the labor 
supply. 

Not only will there be an actual shortage in num- 
bers, but a curious distortion in the existing labor 
force will have taken place. There have been more 
women than men in Europe for many years, owing to 
emigration. In 19I0-19I1 the excess of females in 
the seven leading belligerent countries in Europe was 
5,600,000.' Add to this the estimated war loss of 
25,000,000 men, and an excess of women in Europe 
by some 30,000,000 will be created. 

In the United States the situation has always been 
the opposite of that prevailing in Europe. It has al- 
ways been the land of opportunity, to which has been 
attracted a steady stream of immigrants, especially 
of men in the productive ages between 15 and 45 
years. During the past hundred years the net addi- 
tion to our population, through immigration, has been 
over 30,000,000. In 1910 there was an excess of 
males in this country of 2,692.000. or about six per 
cent.- This disproportion will be reduced somewhat 
by the loss of American soldiers and by the return 
to their homes in Europe of many men of alien birth. 
But even after these allowances have been made, there 
will still be more men than women in the United 
States after the W!.r. 



1 W. S. Rossiter, in American Economic Review, March, 
1917, page 107. 

2 Thirtcpiith Census of the United States (1910), I, 247. 



What effect will the war have upon immigration 
from Europe to the United States.'' Will it return 
to the same channels as before the war.' 

There will be two sets of counteracting forces at 
work. The countries of Europe will need to repair 
the wastes and losses of war, and there will be a great 
demand for labor. At the same time the labor force 
will be smaller. Under such circumstances one 
would expect wages to be high. And they undoubt> 
edly will be higher than before the war, though the 
disbandment of the armies may lead to their tem- 
porary depression at first. On the other hand, the 
debts of the belligerent countries will be enormous 
and taxation will be heavy, while prices will remain 
high for a long time owing to the universal inflation 
of the currency. There will thus be many induce- 
ments to emigration from Europe. This will be es- 
jjecially true of the agricultural sections of eastern 
Europe, Russia, and southern Italy, where tliere will 
be no such industrial expansion as will occur in 
western Europe and where conditions will probably 
be hardest. 

In the United States a period of prosperity may 
be expected after the war. Wages will be higher and 
taxes lower than in Europe. Immigration will con- 
sequently be renewed to this country. But it will 
differ in some respects from the pre-war immigration. 
There will probably be more women relatively than 
men. The inequality in this respect between the Old 
World and the New, enormously heightened by the 
war, will be in part corrected. The new immigration 
will, moreover, be subjected to a sifting process 
which has never been applied before by virtue of 
the law providing for an educational qualification, 
passed over the President's veto in February, 1917, 
and since almost forgotten because of the changed 
conditions. This will keep out some of the elements 
which previously made up a large proportion of our 
immigration. 

How will the labor situation in the United States 
be affected.'' One change has already occurred, and 
is now working itself out. This is the great increase 
in the number of women employed. These will be 
exposed to a double competition after the war — of 
immigrants from I'"uroi)c, especially women; and of 
men returning from the armies. The former will 
compete most severely in lines of domestic service, 
where the present shortage will probably be changed 
to one of ovcr-suiiply, and to a lesser extent in the 
textile and clothing industries.' The struggle be- 
tween the men and women will be for tiie positions 
in the manufacturing and meciianical industries and 
in trades wliich were formerly held by men and have 
now been invaded bv women. It may be that the in- 



' Cf., Statistics of Ocoupatinns. Thirteenth Census of the 
United States (1010), pages .'iKf, 421, 4.T1. 



14 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



dustrial expansion will be so great that all will be 
needed to do the work of our factories and work- 
shops, especially in view of the smaller immigratiou 
and losses among our own men. In any case read- 
justments are bound to occur which will influence our 
whole social development. There is indeed little 
likelihood that women will wish, or be able, to keep 
their positions in emergency lines, as conductors on 
the surface cars, but there will undoubtedly remain 
as a permanent heritage of the changes introduced 
by the war not only an increase in the number of 
women engaged in gainful occupations, but an in- 
crease in the variety of occupations opened to women. 

Not only will the composition of the labor force be 
affected, but the position of labor will be altered. 
One of the first effects of the war has been a great 
increase in the demand for labor and a rise in wages, 
especially among the skilled workers in the mechani- 
cal trades. The advantages thus obtained will not 
easily be relinquished after the war. There has also 
been a growth in the power of labor organizations, 
and a larger influence in shop management. To be 
sure, the government has insisted upon the open shop, 
but labor will be better organized after the war than 
before it, and will undoubtedly use its power to obtain 
and hold gains along many lines. 

Many improvements have already been made in the 
conditions of labor in order to attract the necessary 
workers. In order to insure an adequate supply as 
well as to protect the unskilled and unorganized 
laborers from exploitation, the government and pri- 
vate firms have extended, on a hitherto unknown 
scale, improved housing, welfare supervision, and 
betterment work along many lines. More care is be- 
ing taken of the health and morals of the workers by 
direct administrative action and supervision. This 
movement will undoubtedly persist after the war, and 
probably be enlarged. 

2. Capital. By capital or capital goods must be 
understood the fixed forms in which capital appears 
— railways, ships, factories, houses, machinery, stores 
of goods, farm animals and food supplies. A good 
deal of this existing capital has been destroyed dur- 
ing the war, notably in the case of ships, but prob- 
ablv not so much as has been supposed. The actual 
destruction is limited to the area of military and 
naval operations, where ships have been sunk, houses 
have been burned or demolished, trees cut down, land 
upturned, cattle killed, and all sorts of improvements 
destroyed, like roads, railways, telegraph and tele- 
f)hone systems, etc. It is impossible to say liow much 
tliis lias amounted to. About a year ago the loss of 
public and private property was estimated at 
$t>.000,000.000.* The additional destruction since 
that time would probably bring this figure up to be- 
twppn nine and ten billion dollars. If to this there is 
added the loss of ships, amounting to not less than 
$2,500,000,000, the total may be estimated at the end 
of four years of war at about $12,000,000,000. 

* World's Work, April, 1917, page 588. 



The losses in capital have not been confined to the 
outright destruction of ships and other instruments 
of production. There has also been a steady de- 
terioration of the plant by means of which production 
is carried on. The normal additions to the national 
industrial plant, except for war purposes, have been 
stopped;, that is, no more houses, factories, railways, 
roads, public buildings, etc., are being constructed for 
usual purposes. These items have almost absolutely 
disappeared from the budgets of the belligerent coun- 
tries, as England, France, and Germany. England 
expended on such items in 1907 about $950,000,000; * 
a decade later practically nothing. Professor Alfred 
Marshall has estimated that one-fifth of the existing 
capital invested in plants, machines, tools, and simi- 
lar things must be replaced if we are to keep even; 
more if we are to progress. It is evident that during 
the war the world is slipping back economically. 

Not even the waste and deterioration from natural 
wear and tear has been made good. Railways have 
run down, obsolete machines have not been replaced, 
repairs have not been made except in so far as they 
have been absolutely necessary to keep things run- 
ning. This expenditure in England amounted a de- 
cade ago to $900,000,000 a year; to-day it is a frac- 
tion of that sum. In the United States the railways 
had been permitted to run down physically ; the pro- 
duction of domestic freight cars declined from the 
high-water mark during the last five years of 234,768 
cars in 1912 to 79,367 in 1917, and it is estimated 
that there is at present a shortage of 120,000 freight 
cars. The record has undoubtedly been much worse 
in England, France, Russia, Germany, and the other 
belligerent countries, where moreover the roadbed 
and track and bridges have probably suffered equally 
with the rolling stock. In most of tliese countries 
new corporations for non-military purposes have been 
forbidden, and issues of new stock prohibited. Thus 
in England the issues of industrial securities were cut 
down from $168,000,000 in the first half of 1914 to 
$11,000,000 in the same period of 1917. In the 
United States new promotions have been placed under 
the supervision of the capital issues committee, which 
has been very conservative in permitting any issues 
of securities which might compete with the Liberty 
Loans or absorb capital needed for war industries. 

The main economic waste of the war has not been 
so much the outriglit destruction of existing goods and 
commodities as it has been the diversion of labor and 
capital from the production of useful things and the 
replacement of wasting capital and improvements in 
the material equipment and plant, to the making of 
munitions and cannon and similar articles. These 
are not only used up quickly, sometimes in a single 
act, but they are agents of destruction to destroy 
otiier things. And while the world is making these 
it has not time or energy to produce and replace the 
other things. Along some lines we have already used 

= Brand, in Bankers' Magazine (New York), November, 
1017, page 608. 



SOURCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR 



15 



up the accumulated stores of years, as in the case of 
such articles as food, copper, ships, wool, etc., and 
it will be years before we can catch up again with 
])re-war conditions. 

It was estimated about a year ago that the imme- 
diate needs of the world for the first year after the 
war would be about $^,200,000,000. The Federal 
Trade Council estimated the needs of Belgium and 
France for industrial buildings, for machinery of all 
kinds, for railroad repairs, bridges, roads, and other 
government property at $1,316,000,000. Germany's 
reeds for food supplies and raw materials were cal- 
culated at $1,890,000,000, Austria-Hungary would 
want $400,000,000. and Russia $600.000,000l All of 
these figures would be much higher now as existing 
stocks of capital have been further depleted. 

But the amounts needed to provide for immediate 
needs and to start the industrial machinery going 
again does not begin to measure the cost of the war 
or the economic burdens imposed upon future genera- 
tions. The money cost of the first four years of war 
may be estimated at $150,000,000,000," of which the 
entente allies have borne about two-thirds and the 
central powers one-third. This is an incomprehensi- 
ble figure, and it is still growing. The war is costing 
over $100,000,000 a day, or about $2,000 every sec- 
ond. The present cost of the war exceeds the total 
wealth of the United States, which represents the 
accumulations of three hundred years. 

But from this sum certain deductions may be made 
which reduce somewhat the actual burden. In the 



« Cf., my " Direct Costs of the War." Carnegie Endow- 
ment for International Peace (Washington, March, 1918). 



first place not all of the war expenditures are pure 
loss. Many of them would have to be made in any 
case. Soldiers are fed, clothed, and housed at gov- 
ernment expense, and the bill is paid out of taxes or 
loans instead of appearing in the family budget. 
Secondly, some expenditures represent a productive 
investment, such as the building of nitrate plants or 
merchant vessels. After the war is over these will 
be left as an asset, which will to that extent offset 
the increase in indebtedness. So munitions plants, 
navy yards, additions to steel mills and other indus- 
trial establishments arc not all to be regarded as capi- 
tal irretrievably lost in the wastes of war. Most of 
them can and will be used for peaceful production 
after the war is over, although they now are charged 
as part of the cost of the war. The editor of the 
London Statist ' has estimated that about half of the 
gross costs can be thus salvaged, so that the net money 
cost would be about $75,000,000,000 for four years of 
war. 

Even after all allowances are made, however, there 
will remain an enormous burden of indebtedness, the 
interest charges on which alone will constitute a 
crushing load. In Germany the interest on the new 
debt now created amounts to more than double the 
total imperial budget before the war; in England the 
interest charge is one and one-quarter times the for- 
mer budget. This will entail enormous taxes which 
must continue for an indefinite time. There is here 
involved, however, not a question of loss of capital, 
but rather of the distribution of wealth and the trans- 
fer of income from one class to another. 

^ The Statist, October 23, 1915, page 181. 



16 



HISTORICAL OUTLOOK REPRINTS, NO. 8. 



LIBRARY OF CONGRESS 



020 915 869 3 



PROBLEMS OF WAR AND 

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To understand the problems confronting the nations represented at the peace con- 
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material illustrating German trade methods, and war-time statutes of the United 
States. All of this matter, and much more, is contained in the 

NEW ENLARGED EDITION OF 

Collected Materials for the 
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